There is so much noise around investing through systematic investment plans (SIPs), yet youngsters and new-age investors are only able to grab the essential concepts like rupee cost averaging and the compounding effect involved to grow money and enjoy wealth in the long run. What they ignore is the simplicity of this investing style that keeps them invested in the market without the stress of having to continuously track market movements before deciding when and where to put their money.
Many investors miss out on the fundamentals of SIP investing that allow them to invest in small chunks regularly while allowing them the flexibility of choosing their investment dates. These small investments when done regularly over a prolonged period, say 10 years or more help to earn big rewards in the long run.
Given how the market is growing and more companies are listing their stocks on both the National Stock Exchange (NSE) and Sensex, it makes sense to invest in the market for better yields. Flexibility and the possibility of starting low underline the simplicity of SIP investments among today’s generation of people relying on immediate gratification. Apart, the rampant consumerism in the country coupled with the burgeoning population points to an increased probability of growing businesses and consequently the stock market.
The significance of continuing SIPs in the market can be easily felt when fund houses disallow lump sum investments in some cases. Take, for example, the recent instances of HDFC Mutual Fund disallowing lump-sum investments into its HDFC Defence Fund while Nippon India Mutual Fund and Tata Mutual Fund announced that they will not accept lump-sum investments in their small-cap funds.
However, this does not mean that investors cannot invest in these sectors anymore. The investors surely can by putting their money regularly through SIPs into these funds.
The following table illustrates how simple SIP investments continued for a long investment tenure, say 10-20 years can help amass good returns while securing one’s financial future.
Name of the fund | 10-year returns (in %) | SIP investments (in Rs) | Investment tenure (in years) | Invested amount (in Rs) | Estimated returns (in Rs) | The total value of returns (in Rs) |
Nippon India Small Cap Fund | 29.44 | 10,000 | 10 | 12,00,000 | 60,36,607 | 72,36,607 |
SBI Small Cap Fund | 27.49 | 10,000 | 10 | 12,00,000 | 51,18,188 | 63,18,188 |
DSP Small Cap Fund | 25.10 | 10,000 | 10 | 12,00,000 | 41,64,300 | 53,64,300 |
Kotak Small Cap Fund | 23.57 | 10,000 | 10 | 12,00,000 | 36,38,575 | 48,38,575 |
HDFC Small Cap Fund | 21.60 | 10,000 | 10 | 12,00,000 | 30,45,148 | 42,45,148 |
ICICI Prudential Smallcap Fund | 19.30 | 10,000 | 10 | 12,00,000 | 24,54,440 | 36,54,440 |
| Source: MoneyControl (as on July 11, 2023) | ||||||
The SIP method offers a structured approach to investing, fostering continuous growth in your investments. By automating the process, SIP ensures that your investment keeps growing, unlike lump sum investments where you might occasionally forget to invest. The daily contributions, no matter how small, accumulate over time, thanks to the combined effect of your contributions and the compounded returns. With SIP, you can enjoy peace of mind, knowing that your investments are on track.
